Fed Chair Warsh to push back against calls for rate hikes: Markets

• Fed widely expected to keep policy on hold next week, but traders to look to its communication for clues about path of rates this year.
• Fed chair Kevin Warsh likely to strike a dovish tone, while FOMC projections may drop 2026 rate-cut forecast made in March.
• We expect Fed to keep rates unchanged through 2026; rate rise would require meaningful acceleration in inflation.

The Federal Reserve is widely expected to keep interest rates unchanged when it meets next week, on June 17th, but traders will watch closely for clues about its plans for the rest of the year. We expect Kevin Warsh, the new Fed chair, to push back against market calls for rate rises in 2026, and the fed funds rate to remain steady through year-end.

This will be Warsh’s first meeting at the helm of the Federal Open Market Committee (FOMC). The new chair appears to lean dovish, but he has little chance of persuading the rest of the committee to cut rates this year.

The bar for rate rises is also high. Warsh’s dovish tendencies will make it hard for him to get on board with rate hikes. Inflation would have to accelerate meaningfully for Warsh to side with hawkish voices that want to keep the possibility of tighter policy open.

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